Question

On December 1, Novak Corp. has three DVD players left in stock. All are identical, all are priced to sell at $181. One of the three DVD players left in stock, with serial#1012, was purchased on June 1 at a cost of $40. Another, with serial #1045, was purchased on November 1 for $34. The last player, serial #1056, was purchased on November 30 for $33.
(a) Calculate the cost of goods sold using the FIFO periodic inventory method assuming that two of the three players were sold by the end of December, Discount Electronics' year-end.
(b) If Discount Electronics used the specific identification method instead of the FIFO method, what would Bargain's cost of goods sold be if the company wished to minimize earnings?

Answer 1

Answer:

Novak Corp.

a) Calculation of the cost of goods sold using FIFO:

serial#1012      June 1                  $40

serial #1045    November 1         $34

Total cost of goods sold            $74

b) Calculation of the cost of goods sold under Specific Identification to minimize earnings:

serial#1012      June 1                  $40

serial #1045    November 1         $34

Total cost of goods sold            $74

Explanation:

a) Inventory Summary:

Serial No.         Purchase Date  Unit Cost

serial#1012      June 1                  $40

serial #1045    November 1         $34

serial #1056    November 30     $33

b) For specification identification and in order to minimize earnings, the company would choose report on products with higher costs.